Democrats on Capitol Hill Tangle Over Minimum-Wage Increase

Democratic lawmakers are facing an early rift over tax-relief measures for smaller businesses aimed at easing the impact of a federal minimum-wage hike -- a legislative priority for the party's so-called "First 100 Hours."

On Thursday, the Senate voted 94-3 to raise the minimum wage to $7.25, an increase of $2.10 over two years, while offering $8.3 billion in tax breaks over 10 years for small employers. The minimum wage was last raised in 1997.

A House bill, which raises the minimum wage by the same amount, was approved last month without added tax breaks.

The Senate's tax-relief measures include an immediate deduction for property and equipment, an extension to depreciation periods for restaurant and retail property, and more tax credits for hiring high-risk youth and veterans, among other benefits.

Senate Majority Leader Sen. Harry Reid (D-Nev.) has praised the bill for balancing wage increases with provisions for small-business owners, calling it "simply the right thing to do."

"It's been 10 long years since the minimum wage was last increased," Reid said in a statement last week. "In that time, household costs have risen -- including the price of gas, the price of food, and the price of health care."

However, House Democrats appear to be ready to hold out for a clean bill.

"We remain hopeful that a minimum-wage increase will reach the president's desk soon," House Majority Leader Rep. Steny Hoyer (D-Md.) said in a statement last week.

Hoyer has said any effort to raise the minimum wage should stand on its own.

President Bush has said he will only support an increase that includes tax breaks for employers.

Sen. John Kerry (D-Mass.), the chairman of the Senate Committee on Small Business and Entrepreneurship, said most House Democrats would likely support the tax relief measures for small business if they weren't bundled into a minimum-wage bill.

"Some of our colleagues would embrace the larger portion of the tax pieces, but I think there was a feeling that it should have been a clean bill," Kerry said.

He said he couldn't predict the outcome for the bill, which is now heading back to the committee level over the next few weeks. "That's where this will have to be resolved."

For its part, the U.S. Chamber of Commerce continues to oppose any federally mandated wage hike, regardless of the tax breaks.

Bruce Josten, the group's executive vice president for government affairs, called the temporary tax breaks a "bad deal" for business owners, given that the wage increase was permanent.

"The increase will not help those it is purported to help and will force many small businesses to reduce employee hours, benefits, and new hires, and may even lead to layoffs," Josten said.

Roughly 2 million workers nationwide are paid the federal minimum wage or less, making up 2.7 percent of all hourly-paid workers, according to the Labor Department.

As many as 70 percent of 1,000 small-business owners surveyed in December by Discovery Financial Services said a minimum-wage hike would not impact on their labor costs.